Contracts Flashcards
type of law used in K
service: common law; good (all things moveable): UCC. If K has both goods and services, FL law determines whether the main purpose of the K is goods or services.
K formation requirements
1-mutual assent: offer & acceptance; 2-consideration; and, 3-no valid defenses
offer definition
invitation to enter into a K: 1-promise, 2-certain essential terms, and 3-communication w/ reasonable expectation of a K?
3 types of termination
revocation of offer; rejection; and, lapse of time
revocation of offer definition
an offer is revocable before acceptance, and generally effective upon receipt unless: 1-option contract; 2-detrimental reliance; and 3-partial performance of unilateral contract
option contract rules
1-common law: consideration paid to keep offer open for a certain period of time; 2-FL mailbox rule: does not apply to option K; 3-UCC Firm Offer: offeror is a MERCHANT who signs written assurance that offer will be held open
detrimental reliance definition
the offeror could reasonably expect that the offeree would rely to his detriment on the offer; the offer will be irrevocable for a reasonable period of time in an option contract
partial performance of unilateral K: definition
where offeree’s performance has already begun, offeree has a reasonable time in which to perform,but offeree is NOT mandated to complete performance
rejection of K
includes counter-offer and conditional acceptance
lapse of time definition
failure to accept offer w/i a reasonable period of time or specificied period
acceptance in general
a manifestation of intent to enter into an agreement; must be communicated in any “reasonable manner” before offer is terminated
common law acceptance rule
mirror image rule: acceptance must be identical to the offer; otherwise no K
UCC acceptance rule
a K is formed even if acceptance contains different or additional terms. 1-if one party is not a merchant, terms of offer control; 2-if both parties are merchants, the additional terms in the acceptance become part of the K unless: they materially alter the K, the offer expressly limits acceptance to the terms of the offer, or the offeror objects to the terms w/n a reasonable time
mailbox rule of acceptance
K created at moment of dispatch unless: 1-stipulation; 2-option K; 3-first arrival of rejection/acceptance; 4-rejection and detrimental reliance
consideration in general
requires: 1-bargained for exchange; 2-legal value (benefit or detriment) between parties. FL RULE: (legal minority value rule) that consideration is either benefit or a detriment to one party.
consideration: pre-existing duty
FL finds consideration when a pre-existing duty was owed to a 3rd party
consideration: mutuality
both parties must be bound or = “illusory K”; discuss meetings of the minds, intent to be bound, mutual promises
consideration: promissory estoppel
consideration is not necessary when: 1-promise reasonably expected to induce action or forbearance; 2-of q definite and substantial character, and; 3-action or forbearance induced causing detrimental reliance. Limited remedies: restitution and reliance damages
consideration substitute-FL promises under seal
imports consideration because oral K is harder to modify, but not conclusive
no valid defenses exist generally
(usually 2-3 defenses in fact pattern) enforcement, absence of mutual assent, incapacity, excuse/discharge of performance or non-performance
no valid defenses exist: enforcement
1-SOF: a K w/i the statute must be 1-in writing, 2-signed by party to be charged, and 3-contain the essential terms of the K
Statute of Frauds K types
land; one year rule Ks; sale of goods over $500.
statute of frauds: land
promise creating an interest in land must adequately describe the land, identify the parties, and value to be paid. Ex.: sale of land, leases over 1 yr, fixtures, minerals/structures severed by buyer; mortgages
statute of frauds: one year rule
promises that cannot be completed w/i one year from DATE OF AGREEMENT; must be in writing
statute of frauds: sale of goods
sale of goods over $500, except where: 1-the agreement is for specifically manufactured goods; 2-the agreement is b/w merchants & one sent a confirmatory memo; 3-a party admits the K in court of pleadings; 4-part payment or acceptance has been made, which makes the K enforceable to that extent
FL specifically applies SOF to:
healthcare guarantees, debts barred by SOL, newspaper subscriptions, home solicitation sales, home improvement Ks, & credit card agreements to be in writing
defenses: enforcement: unconscionability
a K may be VOIDABLE where its clauses are extremely one-sided or unfair when made. This includes Ks w/ inconspicuous risk-shifting provisions (hidden disclaimers of warranty) and Ks of adhesion (“take it or leave it” where the parties don’t have equal bargaining power). Tested at TIME K WAS MADE, not later.
defense: absence of mutual assent: unilateral mistake
K enforceable, unless: 1-unconscionable or 2-other party knew/should have known of the mistake
defense: absence of mutual assent: mutual mistake
mutual mistake is a defense if: 1-concerns a basic assumption, 2-adverse material effect on agreed upon exchange, and 3-adversely affected party did not assume risk of the mistake
defense: absence of mutual assent: ambiguity
1-neither party aware-no K unless both parties happened to intend the same meaning; 2-both parties aware-no K unless parties in fact intended the same meaning; 3-one party aware-binding K exists based on the ignorant party’s reasonable interpretation of ambiguous terms
defense: absence of mutual assent: fraudulent misrepresentation
“fraud in the inducement”- VOIDABLE K if innocent party justifiably relied upon the misrepresentation
defense: absence of mutual assent: non-fraudulent misrepresentation
must be representation of a material fact justifiably relied upon; remedy = recission of K
defense: incapacity
K w/ minor, intoxicated person, or person lacking mental capacity are VOIDABLE, except for minors who misrepresent age.
defense: incapacity: minors/infants
marriage of minor removes contractual incapacity. FL Statutory exceptions: 1-loans for higher education; 2-quality for home, farm, or business loan act; 3-seek prenatal care or care for child, even if not married
defense: incapacity: duress or undue influence
duress: physical or economic threats; undue influence: within a caregiver or confidential relationship
defense: excuse/discharge of performance or non-performance: conditions
an event other than the passage of time that MUST occur/fail to occur; excuses performance; not a breach/promise; in FL subsequent acts may be used to determine whether it was a condition or promise
defense: excuse/discharge of performance or non-performance: condition precedent
occurs before performance due to relieve performance obligations
defense: excuse/discharge of performance or non-performance: condition subsequent
Occurance “cuts off” an existing duty to perform; party to whom duty was owed may waive the duty; person having the benefit of a condition may indicate by words or conduct that she won’t insist on it
defense: excuse/discharge of performance or non-performance: recovery under unjust enrichment in general
where a condition fails to occur and one party has performed
defense: excuse/discharge of performance or non-performance: recovery under unjust enrichment: excuse by anticipatory repudiation
words or conduct that UNEQUIVOCALLY indicate an inability or an unwillingness to perform when time comes. The alternative for the non-repudiating party are: 1-treat the anticipatory repudiation as a total repudiation and sue immediately; 2-suspend his own performance and wait to sue until the due date; 3-treat as an offer to rescind and treat the K as discharged; 4-ignore the repudiation and urge performance
defense: excuse/discharge of performance or non-performance: recovery under unjust enrichment: excuse by divisibility of K
allows partial performance/remedy for unperformed part of K; created when: 1-performance by each party is divided into 2 or more parts under K; 2-number of parts due by each party is the same; 3-performance of each part by one party is equal to the corresponding part by the other party
defense: excuse/discharge of performance or non-performance: impossibility
OBJECTIVE standard that excuses performance. (no one could have performed according to the K terms). 1-must arise after the K was entered into such as death or incapacity or performer, unless performance can be delegated; new law rendering K illegal; destruction of K’s subject matter at no fault f promisor and no longer possible to perform. NOTE: destruction of a building in progress does not discharge duty to rebuild.
defense: excuse/discharge of performance or non-performance: impracticability
EXCUSES a party’s performance. Requires that a party encounter “extreme and unreasonable difficulty or expense” that was NOT anticipated. A mere change due to normal risks that could have been anticipated is not good enough. Fl RATIONALE: “circumstances causing breach have made performance vitally different different from what was anticipated; so that K cannot reasonably be thought to govern.”
defense: excuse/discharge of performance or non-performance: frustration of purpose
EXCUSES performance because it is pointless. Requires: 1-supervening event; 2-unforeseeable at the time of K; 3-completely or almost completely destroy’s K purpose; 4-as understood by both parties
K modification: common law
if a party has a pre-existing duty to perform, then attempts to modify the K, the new K is not enforceable unless: 1-new or different consideration is given (consideration is required); 2-the promise ratifies voidable obligation ( a promise to pay a debt barred by the SOL); 3-the promise is made to a 3rd party; or 4-there is an honest dispute as to whether a duty is owed
K modification: UCC
NO consideration required when modification is made in good faith
K modification: FL & consideration
FL follows the majority rule that a “slight deviation” in terms is sufficient consideration to support modification
interpretation of K: Parole evidence rule
where parties to a K express their agreement IN WRITING with intent of INTEGRATION (final expression of their bargain); any other expressions made prior or contemporaneous with are INADMISSIBLE as evidence to vary the K terms. Evidence offered to prove fraud, duress, mistake, misrepresentation, illegality, or modification is inadmissible.
interpretation of K: Parole evidence rule: Corbin test
majority test that considers the “specific circumstances of the transaction involved.”
interpretation of K: Parole evidence rule: williston test
minority test that only looks at the face of the written agreement
warranties in general
Ks for sale of goods generally include either express or implied warranties
implied warranty of merchantability
in every sale by a MERCHANT who deals in goods of a kind, there is an implied warranty that the goods are “merchantable” (“fit for the ordinary purposes for which such goods are used”). Specific disclaimer in written sales K must mention “merchantability” and must be “conspicuous” (larger type, contrasting color/font, marks draw reader’s attention).
implied warranty of fitness for a particular purpose
ANY SELLER, merchant or not, has reason to KNOW OF THE PARTICULAR PURPOSE for which the goods are being used, and that BUYER RELIES on the seller’s skill and judgment to select suitable goods. Specific disclaimer in writing must be conspicuous.
express warranty
any affirmation of fact, promise, description, model, or sample, made by seller to buyer, which is part of the basis of bargain, which buyer could have relied upon to enter K. Once made, express warranties are very difficult to disclaim, because contradictory language between the warranty and disclaimer is read in favor of the warranty, overriding the disclaimer.
breach in general
1-an absolute duty to perform, and 2-the duty has not been performed or has been performed inadequately or improperly.
minor breach definition
non-breaching party receives substantial benefit of bargain despite the breaching party’s failure to perform. Does not discharge non-breaching party from duty to perform, just gives rights to damages
material breach definition
non-breaching party does NOT receive the substantial benefit of her bargain. Discharges non-breaching party’s duty to perform and she has immediate right to seek remedies.
minor v. material breach
1-amount of benefit received by non-breaching party; 2-adequacy of compensation for damages to injured party; 3-extent of performance by breaching party; 4-hardship to breaching party; 5-negligent or willful behavior of breaching party; 6-likelihood of performance of remainder of K
UCC perfect tender rule
if goods or their delivery fail to conform to the K in any way, the buyer may reject all, accept all, or partially accept/reject any ratio of commercial units
Exceptions to UCC perfect tender rule
1-installment Ks- installments can be rejected only if non-conformity “substantially impairs” the value of that installment AND it cannot be cured; same with K as a whole; 2-seller’s right to cure: a seller has a right to cure in the following situations: a-seller may cure after giving reasonable notice of intent to cure and furnishing new tender of conforming goods, if within original K performance time allowed, buyer must accept or b-after time for performance of K has expired, if buyer rejects goods that seller reasonably believed would be acceptable, seller may provide reasonable notice of intent to cure, giving seller additional time to cure. seller’s reasonable belief is determined by: 1-trade practices or prior dealing w/ buyer; or 2-seller unaware of defect despite proper business conduct
damages in general
P MUST MITIGATE damages; avoidable damages are not recoverable
damages: specific performance: in general
K is for something rare or unique and monetary damages are inadequate.
damages: specific performance: land
land can be gotten through specific performance; alternative is injunction
damages: specific performance: service Ks
cannot get specific performance because it’s akin to involuntary servitude; can get injunction
damages: specific performance: covenant not to compete
must be 1-reasonably necessary to protect a legitimate interest; 2-reasonable geographic scope and duration; 3-not harm the public
damages: specific performance: equitable defenses available
laches, unclean hands, sale to bona fide purchaser
damages: monetary: compensatory damages
put non-breaching party in same position as if K had been performed
damages: monetary: expectation damages
give the non-breaching party the benefit of her bargain; K price - market price
damages: monetary: reliance damages
non-breaching party’s cost of performance
damages: monetary: consequential damages
ANY damages recoverable if: 1-reasonably foreseeable when K was made; 2-unavoidable through reasonable efforts; 3-provable with reasonable certainty (available to buyer only in sale of goods)
damages: monetary: incidental damages
in sale of goods, non-breaching party: buyer’s expense of inspection, transportation, custody & care; seller’s expense of storing, shipping, returning and reselling
damages: monetary: punitive damages
generally NOT awarded in Ks
damages: monetary: liquidated damages
amount stipulated to by parties in K in event of breach: must be 1-difficult to estimate at K formation and 2-reasonable forecast of compensatory damages
damages: restitution
prevents unjust enrichment when non-breaching party has not fully performed where K unenforceable or no K exist; recovery is value of “benefit conferred”
damages: rescission
K VOIDABLE- “never existed” if before or at time K entered: 1-mutual mistake; 2-unilateral mistake if other party knew or extreme hardship by mistaken party; 3-misrepresentation; 4-duress, undue influence, illegality, incapacity or no consideration. Equitable defenses are laches, unclean hands
damages: reformation
K is modified to conform to parties’ original intent; proven by clear and convincing evidence
damages: SOL
FL written K = 5 years; oral K = 4 years; parties may not lengthen, but may limit to 1 year
tortious interference with K
interference w/ business relationship: 1-K between parties; 2-3rd party knew of relationship; 3-3rd party causes breach; 4-damages, i.e. money lost
consideration: forms
i) A return promise to do something;
ii) A return promise to refrain from doing something legally permitted;
iii) The actual performance of some act; or
iv) Refraining from doing some act.
Florida Distinction: Promise to Pay a Debt Barred by the Statute of Limitations
In Florida, for a promise to pay a debt after the statute of limitations has run to be enforceable, it must satisfy the Statute of Frauds and be in writing and signed by the party to be charged. Fla. Stat. § 95.04.
Test for impracticability in a K
in FL, the rationale for the doctrine of impracticability is that circumstances causing breach have made performance vitally different from what was anticipated, so that the K cannot reasonably be thought to govern.
